G.R. No. 184513.  March 9, 2016.

*
 
DESIGNER BASKETS, INC., petitioner, vs. AIR SEA TRANSPORT, INC. and ASIA CARGO
CONTAINER LINES, INC., respondents.

Mercantile Law; Bill of Lading; Words and Phrases; A bill of lading is defined as “a written
acknowledgment of the receipt of goods and an agreement to transport and to deliver them at a specified
place to a person named or on his order.”—A bill of lading is defined as “a written acknowledgment of the
receipt of goods and an agree-

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*  THIRD DIVISION.

 
 
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ment to transport and to deliver them at a specified place to a person named or on his order.” It may
also be defined as “an instrument in writing, signed by a carrier or his agent, describing the freight so as
to identify it, stating the name of the consignor, the terms of the contract of carriage, and agreeing or
directing that the freight be delivered to bearer, to order or to a specified person at a specified place.
Same; Same; Common Carriers; Under Article 350 of the Code of Commerce, “the shipper as well as
the carrier of the merchandise or goods may mutually demand that a bill of lading be made.”—Under
Article 350 of the Code of Commerce, “the shipper as well as the carrier of the merchandise or goods may
mutually demand that a bill of lading be made.” A bill of lading, when issued by the carrier to the
shipper, is the legal evidence of the contract of carriage between the former and the latter. It defines the
rights and liabilities of the parties in reference to the contract of carriage. The stipulations in the bill of
lading are valid and binding unless they are contrary to law, morals, customs, public order or public
policy.
Same; Same; Same; A carrier is allowed by law to release the goods to the consignee even without the
latter’s surrender of the bill of lading.—A carrier is allowed by law to release the goods to the consignee
even without the latter’s surrender of the bill of lading. The third paragraph of Article 353 of the Code of
Commerce is enlightening: Article 353. The legal evidence of the contract between the shipper and the
carrier shall be the bills of lading, by the contents of which the disputes which may arise regarding their
execution and performance shall be decided, no exceptions being admissible other than those of falsity
and material error in the drafting. After the contract has been complied with, the bill of lading which the
carrier has issued shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled, unless in the same act
the claim which the parties may wish to reserve be reduced to writing, with the exception of that
provided for in Article 366. In case the consignee, upon receiving the goods, cannot return the
bill of lading subscribed by the carrier, because of its loss or any other cause, he must give
the latter a receipt for the goods delivered, this receipt producing the same effects as the
return of the bill of lading.

 
 
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140 SUPREME COURT REPORTS ANNOTATED
Designer Baskets, Inc. vs. Air Sea Transport, Inc.

Same; Same; Same; The general rule is that upon receipt of the goods, the consignee surrenders the
bill of lading to the carrier and their respective obligations are considered canceled; Exceptions.—The
general rule is that upon receipt of the goods, the consignee surrenders the bill of lading to the carrier
and their respective obligations are considered canceled. The law, however, provides two exceptions
where the goods may be released without the surrender of the bill of lading because the consignee can no
longer return it. These exceptions are when the bill of lading gets lost or for other cause. In either case,
the consignee must issue a receipt to the carrier upon the release of the goods. Such receipt shall produce
the same effect as the surrender of the bill of lading.
Same; Same; Same; The non-surrender of the original bill of lading does not violate the carrier’s duty
of extraordinary diligence over the goods.—We have already ruled that the non-surrender of the original
bill of lading does not violate the carrier’s duty of extraordinary diligence over the goods. In Republic v.
Lorenzo Shipping Corporation, 450 SCRA 550 (2005), we found that the carrier exercised extraordinary
diligence when it released the shipment to the consignee, not upon the surrender of the original bill of
lading, but upon signing the delivery receipts and surrender of the certified true copies of the bills of
lading. Thus, we held that the surrender of the original bill of lading is not a condition precedent for a
common carrier to be discharged of its contractual obligation.
Same; Same; Same; Law and jurisprudence is settled that the surrender of the original bill of lading
is not absolute; that in case of loss or any other cause, a common carrier may release the goods to the
consignee even without it.—Clearly, law and jurisprudence is settled that the surrender of the original
bill of lading is not absolute; that in case of loss or any other cause, a common carrier may release the
goods to the consignee even without it. Here, Ambiente could not produce the bill of lading covering the
shipment not because it was lost, but for another cause: the bill of lading was retained by DBI pending
Ambiente’s full payment of the shipment. Ambiente and ASTI then entered into an Indemnity
Agreement, wherein the former asked the latter to release the shipment even without the surrender of
the bill of lading. The execution of this Agreement, and the undisputed fact that the shipment was
released to Ambiente pursu-

 
 
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ant to it, to our mind, operates as a receipt in substantial compliance with the last paragraph of
Article 353 of the Code of Commerce.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
  Riguera & Riguera Law Office for petitioner.
  Sto. Tomas & Serrano for respondents.

JARDELEZA,  J.:
 
This is a Petition for Review on Certiorari1 of the August 16, 2007 Decision2 and September
2, 2008 Resolution3  of the Court of Appeals (CA) in C.A.-G.R. CV No. 79790, absolving
respondents Air Sea Transport, Inc. (ASTI) and Asia Cargo Container Lines, Inc. (ACCLI)
from liability in the complaint for sum of money and damages filed by petitioner Designer
Baskets, Inc. (DBI).
 
 The Facts
 
DBI is a domestic corporation engaged in the production of housewares and handicraft
items for export.4  Sometime in October 1995, Ambiente, a foreign-based company, ordered
from DBI5 223 cartons of assorted wooden items (the ship-

_______________

1  Dated November 3, 2008 and filed under Rule 45 of the Rules of Court. Rollo, pp. 9-26.
2    Penned by Associate Justice Mariflor P. Punzalan-Castillo, with Associate Justices Marina L. Buzon and
Rosmari D. Carandang, concurring. Id., at pp. 27-45.
3  Id., at pp. 46-49.
4  Complaint, Records, p. 1.
5  DBI received Import Purchase Order No. 23597A dated September 28, 1995 via fax from Ambiente, id., at p. 2.

 
 
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142 SUPREME COURT REPORTS ANNOTATED

Designer Baskets, Inc. vs. Air Sea Transport, Inc.

ment).6 The shipment was worth Twelve Thousand Five Hundred Ninety and Eighty-Seven
Dollars (US$12,590.87) and payable through telegraphic transfer.7  Ambiente designated
ACCLI as the forwarding agent that will ship out its order from the Philippines to the United
States (US). ACCLI is a domestic corporation acting as agent of ASTI, a US-based corporation
engaged in carrier transport business, in the Philippines.8
On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from Manila
and delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239, Beverly Hills, California. To
acknowledge receipt and to serve as the contract of sea carriage, ACCLI issued to DBI
triplicate copies of ASTI Bill of Lading No. AC/MLLA601317.9 DBI retained possession of the
originals of the bills of lading pending the payment of the goods by Ambiente.10
On January 23, 1996, Ambiente and ASTI entered into an Indemnity Agreement
(Agreement).11 Under the Agreement, Ambiente obligated ASTI to deliver the shipment to it
or to its order “without the surrender of the relevant bill(s) of lading due to the non-arrival or
loss thereof.”12  In exchange, Ambiente undertook to indemnify and hold ASTI and its agent
free from any liability as a result of the release of the shipment.13 Thereafter, ASTI released
the shipment to Ambiente without the knowledge of DBI, and without it receiving payment for
the total cost of the shipment.14

_______________

6   Id.
7   Per Invoice Number 497 dated January 6, 1996, id., at p. 11.
8   Id., at pp. 1-2.
9   Id., at pp. 46-48.
10  CA Decision, Rollo, p. 28.
11  Id., at p. 81.
12  Id.
13  Id.
14  Id., at pp. 28-29.

 
 
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Designer Baskets, Inc. vs. Air Sea Transport, Inc.

DBI then made several demands to Ambiente for the payment of the shipment, but to no
avail. Thus, on October 7, 1996, DBI filed the Original Complaint against ASTI, ACCLI and
ACCLI’s incorporators-stockholders15  for the payment of the value of the shipment in the
amount of US$12,590.87 or Three Hundred Thirty-Three Thousand and Six Hundred Fifty-
Eight Pesos (P333,658.00), plus interest at the legal rate from January 22, 1996, exemplary
damages, attorney’s fees and cost of suit.16
In its Original Complaint, DBI claimed that under Bill of Lading Number
AC/MLLA601317, ASTI and/or ACCLI is “to release and deliver the cargo/shipment to the
consignee, x  x  x, only after the original copy or copies of [the] Bill of Lading is or are
surrendered to them; otherwise, they become liable to the shipper for the value of the
shipment.”17  DBI also averred that ACCLI should be jointly and severally liable with its
codefendants because ACCLI failed to register ASTI as a foreign corporation doing business in
the Philippines. In addition, ACCLI failed to secure a license to act as agent of ASTI.18
On February 20, 1997, ASTI, ACCLI, and ACCLI’s incorporators-stockholders filed a
Motion to Dismiss.19  They argued that: (a) they are not the real parties-in-interest in the
action because the cargo was delivered and accepted by Ambiente. The case, therefore, was a
simple case of nonpayment of the buyer; (b) relative to the incorporators-stockholders of
ACCLI, piercing the corporate veil is misplaced; (c) contrary to the allegation of DBI, the bill of
lading covering the shipment does not contain a proviso exposing ASTI to liability in case

_______________

15    The incorporators-stockholders sued are the following: Marlon Gaya, Richard Sim Ng, Ng Tiam Tiong,
Fortunata Sim Ng, Ng Uy Sim, Tina Orleans Ng and Analy R. Borbon. Original Complaint, Records, p. 1.
16  Id., at pp. 1-5.
17  Id., at p. 3.
18  Records, pp. 3-4.
19  Id., at pp. 23-26.

 
 
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144 SUPREME COURT REPORTS ANNOTATED

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the shipment is released without the surrender of the bill of lading; and (d) the Original
Complaint did not attach a certificate of non-forum shopping.20
DBI filed an Opposition to the Motion to Dismiss,21 asserting that ASTI and ACCLI failed
to exercise the required extraordinary diligence when they allowed the cargoes to be
withdrawn by the consignee without the surrender of the original bill of lading. ASTI, ACCLI,
and ACCLI’s incorporators-stockholders countered that it is DBI who failed to exercise
extraordinary diligence in protecting its own interest. They averred that whether or not the
buyer-consignee pays the seller is already outside of their concern.22
Before the trial court could resolve the motion to dismiss, DBI filed an Amended
Complaint23 impleading Ambiente as a new defendant and praying that it be held solidarily
liable with ASTI, ACCLI, and ACCLI’s incorporators-stockholders for the payment of the
value of the shipment. DBI alleged that it received reliable information that the shipment was
released merely on the basis of a company guaranty of Ambiente.24 Further, DBI asserted that
ACCLI’s incorporators-stockholders have not yet fully paid their stock subscriptions; thus,
“under the circumstance of [the] case,” they should be held liable to the extent of the balance
of their subscriptions.25
In their Answer,26  ASTI, ACCLI, and ACCLI’s incorporators-stockholders countered that
DBI has no cause of action against ACCLI and its incorporators-stockholders because the
Amended Complaint, on its face, is for collection of sum of money by an unpaid seller against a
buyer. DBI did not allege

_______________

20  Id., at pp. 23-25.

21  Id., at pp. 30-36.
22  Id., at pp. 65-68.
23  Rollo, pp. 50-57.
24  Id., at p. 53.
25  Id., at p. 54.
26  Id., at pp. 58-65.

 
 
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any act of the incorporators-stockholders which would constitute as a ground for piercing
the veil of corporate fiction.27 ACCLI also reiterated that there is no stipulation in the bill of
lading restrictively subjecting the release of the cargo only upon the presentation of the
original bill of lading.28  It regarded the issue of ASTI’s lack of license to do business in the
Philippines as “entirely foreign and irrelevant to the issue of liability for breach of contract”
between DBI and Ambiente. It stated that the purpose of requiring a license (to do business in
the Philippines) is to subject the foreign corporation to the jurisdiction of Philippine courts.29
On July 22, 1997, the trial court directed the service of summons to Ambiente through the
Department of Trade and Industry.30  The summons was served on October 6, 199731  and
December 18, 1997.32  Ambiente failed to file an Answer. Hence, DBI moved to declare
Ambiente in default, which the trial court granted in its Order dated September 15, 1998.33

The Ruling of the Trial Court

 
In a Decision34  dated July 25, 2003, the trial court found ASTI, ACCLI, and Ambiente
solidarily liable to DBI for the value of the shipment. It awarded DBI the following:

1. US$12,590.87, or the equivalent of [P]333,658.00 at the time of the shipment, plus

12% interest per annum from 07 January 1996 until the same is fully paid;
2. [P]50,000.00 in exemplary damages;

_______________

27  Id., at pp. 60-61.

28  Id., at p. 61.
29  Id., at p. 62.
30  Records, p. 92.
31  Id., at pp. 96, 107-108.
32  Id., at p. 115.
33  Id., at pp. 168-169.
34  Penned by Judge Raul Bautista Villanueva. Rollo, pp. 82-92.
  
 
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146 SUPREME COURT REPORTS ANNOTATED

Designer Baskets, Inc. vs. Air Sea Transport, Inc.

3. [P]47,000.00 as and for attorney’s fees; and

4. [P]10,000.00 as cost of suit.35
 
The trial court declared that the liability of Ambiente is “very clear.” As the buyer, it has an
obligation to pay for the value of the shipment. The trial court noted that “[the case] is a
simple sale transaction which had been perfected especially since delivery had already been
effected and with only the payment for the shipment remaining left to be done.”36
With respect to ASTI, the trial court held that as a common carrier, ASTI is bound to
observe extraordinary diligence in the vigilance over the goods. However, ASTI was remiss in
its duty when it allowed the unwarranted release of the shipment to Ambiente.37  The trial
court found that the damages suffered by DBI was due to ASTI’s release of the merchandise
despite the non-presentation of the bill of lading. That ASTI entered into an Agreement with
Ambiente to release the shipment without the surrender of the bill of lading is of no
moment.38  The Agreement cannot save ASTI from liability because in entering into such, it
violated the law, the terms of the bill of lading and the right of DBI over the goods.39
The trial court also added that the Agreement only involved Ambiente and ASTI. Since DBI
is not privy to the Agreement, it is not bound by its terms.40
The trial court found that ACCLI “has not done enough to prevent the defendants Ambiente
and [ASTI] from agreeing among themselves the release of the goods in total disregard of
[DBI’s] rights and in contravention of the country’s civil

_______________

35  Id., at p. 92.
36  Id., at p. 89.
37  Id.
38  Id.
39  Id., at p. 90.
40  Id., at p. 89.

 
 
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and commercial laws.”41 As the forwarding agent, ACCLI was “well aware that the goods
cannot be delivered to the defendant Ambiente since [DBI] retained possession of the originals
of the bill of lading.”42 Consequently, the trial court held ACCLI solidarily liable with ASTI.
As regards ACCLI’s incorporators-stockholders, the trial court absolved them from liability.
The trial court ruled that the participation of ACCLI’s incorporators-stockholders in the
release of the cargo is not as direct as that of ACCLI.43
DBI, ASTI and ACCLI appealed to the CA. On one hand, DBI took issue with the order of
the trial court awarding the value of the shipment in Philippine Pesos instead of US Dollars.
It also alleged that even assuming that the shipment may be paid in Philippine Pesos, the
trial court erred in pegging its value at the exchange rate prevailing at the time of the
shipment, rather than at the exchange rate prevailing at the time of payment.44
On the other hand, ASTI and ACCLI questioned the trial court’s decision finding them
solidarily liable with DBI for the value of the shipment. They also assailed the trial court’s
award of interest, exemplary damages, attorney’s fees and cost of suit in DBI’s favor.45

The Ruling of the Court of Appeals

 
The CA affirmed the trial court’s finding that Ambiente is liable to DBI, but absolved ASTI
and ACCLI from liability. The CA found that the pivotal issue is whether the law requires
that the bill of lading be surrendered by the buyer/
consignee before the carrier can release the goods to the former. It then answered the question
in the negative, thus:

_______________

41  Id., at p. 90.
42  Id.
43  Id., at p. 92.
44  Brief for the Plaintiff-Appellant, id., at pp. 137-147.
45  Id., at pp. 97-119.

 
 
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148 SUPREME COURT REPORTS ANNOTATED

Designer Baskets, Inc. vs. Air Sea Transport, Inc.

There is nothing in the applicable laws that require the surrender of bills of
lading before the goods may be released to the buyer/consignee. In fact, Article
353 of the Code of Commerce suggests a contrary conclusion, viz. —
“Art.  353.  After the contract has been complied with, the bill of lading which
the carrier has issued shall be returned to him, and by virtue of the exchange of
this title with the thing transported, the respective obligations shall be considered
canceled. x x x In case the consignee, upon receiving the goods, cannot return the
bill of lading subscribed by the carrier because of its loss or of any other cause, he
must give the latter a receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading.”
The clear import of the above article is that the surrender of the bill of lading is not an
absolute and mandatory requirement for the release of the goods to the consignee. The
fact that the carrier is given the alternative option to simply require a receipt
for the goods delivered suggests that the surrender of the bill of lading may be
dispensed with when it cannot be produced by the consignee for whatever
cause.46 (Emphasis supplied)
 
The CA stressed that DBI failed to present evidence to prove its assertion that the
surrender of the bill of lading upon delivery of the goods is a common mercantile
practice.47  Further, even assuming that such practice exists, it cannot prevail over law and
jurisprudence.48

_______________
 46  Id., at p. 34.
47  Id., at pp. 36-37.
48  Id.

 
 
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As for ASTI, the CA explained that its only obligation as a common carrier was to deliver
the shipment in good condition. It did not include looking beyond the details of the transaction
between the seller and the consignee, or more particularly, ascertaining the payment of the
goods by the buyer Ambiente.49
Since the agency between ASTI and ACCLI was established and not disputed by any of the
parties, neither can ACCLI, as a mere agent of ASTI, be held liable. This must be so in the
absence of evidence that the agent exceeded its authority.50
The CA, thus, ruled:
 
WHEREFORE, in view of the foregoing, the Decision dated July 25, 2003 of Branch
255 of the Regional Trial court of Las [Piñas] City in Civil Case No. LP-96-0235 is
hereby AFFIRMED with the following MODIFICATIONS:
1. Defendants-appellants Air Sea Transport, Inc. and Asia Cargo Container
Lines, Inc. are hereby ABSOLVED from all liabilities;
2. The actual damages to be paid by defendant Ambiente shall be in the amount
of US$12,590.87. Defendant Ambiente’s liability may be paid in Philippine
currency, computed at the exchange rate prevailing at the time of payment;51 and

_______________

49  Id., at p. 36.
50  Id., at p. 37.
51  The CA, citing C.F. Sharp & Co., Inc. v. Northwest Airlines, Inc., G.R. No. 133498, April 18, 2002, 381 SCRA
314, 319-320, stated that Republic Act No. 8183 allows the parties to agree upon payment in another currency other
than the Philippine Peso. Hence, the obligation of Ambiente may be paid at the currency agreed upon by the parties or
its peso equivalent at the time of payment.

 
 
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150 SUPREME COURT REPORTS ANNOTATED

Designer Baskets, Inc. vs. Air Sea Transport, Inc.

3. The rate of interest to be imposed on the total amount of US$12,590.87 shall

be 6%  per annum  computed from the filing of the complaint on October 7, 1996
until the finality of this decision. After this decision becomes final and executory,
the applicable rate shall be 12% per annum until its full satisfaction.
SO ORDERED.52
 
 Hence, this petition for review, which raises the sole issue of whether ASTI and ACCLI
may be held solidarily liable to DBI for the value of the shipment.
 
Our Ruling
 
We deny the petition.

A common carrier may release the

goods to the consignee even without
the surrender of the bill of lading.
 
This case presents an instance where an unpaid seller sues not only the buyer, but the
carrier and the carrier’s agent as well, for the payment of the value of the goods sold. The
basis for ASTI and ACCLI’s liability, as pleaded by DBI, is the bill of lading covering the
shipment.
A bill of lading is defined as “a written acknowledgment of the receipt of goods and an
agreement to transport and to deliver them at a specified place to a person named or on his
order.”53 It may also be defined as “an instrument in writing, signed by a carrier or his agent,
describing the freight so as to

_______________

52  Rollo, pp. 43-44.

53  Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. IV, p. 133, 1993
ed.; citing Interprovincial Autobus Co., Inc. v. Collector of Internal Revenue, 98 Phil. 290, 293 (1956), citing 9 Am. Jur.
662.

 
 
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identify it, stating the name of the consignor, the terms of the contract of carriage, and
agreeing or directing that the freight be delivered to bearer, to order or to a specified person at
a specified place.54
Under Article 350 of the Code of Commerce, “the shipper as well as the carrier of the
merchandise or goods may mutually demand that a bill of lading be made.” A bill of lading,
when issued by the carrier to the shipper, is the legal evidence of the contract of carriage
between the former and the latter. It defines the rights and liabilities of the parties in
reference to the contract of carriage. The stipulations in the bill of lading are valid and binding
unless they are contrary to law, morals, customs, public order or public policy.55
Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to DBI. This bill
of lading governs the rights, obligations and liabilities of DBI and ASTI. DBI claims that Bill
of Lading No. AC/MLLA601317 contains a provision stating that ASTI and ACCLI are “to
release and deliver the cargo/shipment to the consignee, x x x, only after the original copy or
copies of the said Bill of Lading is or are surrendered to them; otherwise they become liable to
[DBI] for the value of the shipment.”56 Quite tellingly, however, DBI does not point or refer to
any specific clause or provision on the bill of lading supporting this claim. The language of the
bill of lading shows no such requirement. What the bill of lading provides on its face is:
 Received by the Carrier in apparent good order and condition unless otherwise
indicated hereon, the Container(s) and/or goods hereinafter mentioned to be transported
and/or otherwise forwarded from the Place of Re-

_______________

54  Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, id.; citing Black’s Law

Dictionary.
55  Provident Insurance Corp. v. Court of Appeals, G.R. No. 118030, January 15, 2004, 419 SCRA 480, 483.
56  Amended Complaint, Rollo, p. 52.

 
 
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ceipt to the intended Place of Delivery upon and [subject] to all the terms and conditions
appearing on the face and back of this Bill of Lading. If required by the Carrier this
Bill of Lading duly endorsed must be surrendered in exchange for the Goods of
delivery order.57 (Emphasis supplied)
 
There is no obligation, therefore, on the part of ASTI and ACCLI to release the goods only
upon the surrender of the original bill of lading.
Further, a carrier is allowed by law to release the goods to the consignee even without the
latter’s surrender of the bill of lading. The third paragraph of Article 353 of the Code of
Commerce is enlightening:
 
Article  353.  The legal evidence of the contract between the shipper and the carrier
shall be the bills of lading, by the contents of which the disputes which may arise
regarding their execution and performance shall be decided, no exceptions being
admissible other than those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has
issued shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled, unless
in the same act the claim which the parties may wish to reserve be reduced to writing,
with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of
lading subscribed by the carrier, because of its loss or any other cause, he must
give the latter a receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading. (Emphasis supplied)

_______________

57  Id., at pp. 70-72.

 
 
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The general rule is that upon receipt of the goods, the consignee surrenders the bill of
lading to the carrier and their respective obligations are considered canceled. The law,
however, provides two exceptions where the goods may be released without the surrender of
the bill of lading because the consignee can no longer return it. These exceptions are when the
bill of lading gets lost or for other cause. In either case, the consignee must issue a receipt to
the carrier upon the release of the goods. Such receipt shall produce the same effect as the
surrender of the bill of lading.
We have already ruled that the non-surrender of the original bill of lading does not violate
the carrier’s duty of extraordinary diligence over the goods.58 In Republic v. Lorenzo Shipping
Corporation,59 we found that the carrier exercised extraordinary diligence when it released the
shipment to the consignee, not upon the surrender of the original bill of lading, but upon
signing the delivery receipts and surrender of the certified true copies of the bills of lading.
Thus, we held that the surrender of the original bill of lading is not a condition precedent for a
common carrier to be discharged of its contractual obligation.
Under special circumstances, we did not even require presentation of any form of receipt by
the consignee, in lieu of the original bill of lading, for the release of the goods. In  Macam v.
Court of Appeals,60  we absolved the carrier from liability for releasing the goods to the
consignee without the bills of lading despite this provision on the bills of lading:

_______________

58  See Republic v. Lorenzo Shipping Corporation, G.R. No. 153563, February 7, 2005, 450 SCRA 550, 556; as cited
by the CA, Rollo, pp. 34-35.
59  Republic v. Lorenzo Shipping Corporation, id.
60  G.R. No. 125524, August 25, 1999, 313 SCRA 77.

 
 
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Designer Baskets, Inc. vs. Air Sea Transport, Inc.

“One of the Bills of Lading must be surrendered duly endorsed in exchange for the
goods or delivery order.”61  (Citations omitted)
 
In clearing the carrier from liability, we took into consideration that the shipper sent a
telex to the carrier after the goods were shipped. The telex instructed the carrier to deliver the
goods without need of presenting the bill of lading and bank guarantee per the shipper’s
request since “for prepaid shipt ofrt charges already fully paid our end x x x.”62 We also noted
the usual practice of the shipper to request the shipping lines to immediately release
perishable cargoes through telephone calls.
Also, in  Eastern Shipping Lines, Inc. v. Court of Appeals,63  we absolved the carrier from
liability for releasing the goods to the supposed consignee, Consolidated Mines, Inc. (CMI), on
the basis of an Undertaking for Delivery of Cargo but without the surrender of the original bill
of lading presented by CMI. Similar to the factual circumstance in this case, the Undertaking
in  Eastern Shipping Lines  guaranteed to hold the carrier “harmless from all demands,
claiming liabilities, actions and expenses.”64 Though the central issue in that case was who the
consignee was in the bill of lading, it is noteworthy how we gave weight to the Undertaking in
ruling in favor of the carrier:
 But assuming that CMI may not be considered consignee, the petitioner cannot be
faulted for releasing the goods to CMI under the circumstances, due to its lack of
knowledge as to who was the real consignee in view of CMI’s strong representations and
letter of undertaking wherein it stated that the bill of lading would be pre-

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61  Id., at p. 78.
62  Id., at p. 79.
63  G.R. No. 80936, October 17, 1990, 190 SCRA 512; as cited by the CA, Rollo, pp. 35-36.
64  Id., at p. 515.

 
 
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sented later. This is precisely the situation covered by the last paragraph of Art. 353 of the
[Code of Commerce] to wit:
 
“If in case of loss or for any other reason whatsoever, the consignee cannot return
upon receiving the merchandise the bill of lading subscribed by the carrier, he shall give
said carrier a receipt of the goods delivered this receipt producing the same effects as the
return of the bill of lading.”65
 
Clearly, law and jurisprudence is settled that the surrender of the original bill of lading is
not absolute; that in case of loss or any other cause, a common carrier may release the goods to
the consignee even without it.
Here, Ambiente could not produce the bill of lading covering the shipment not because it
was lost, but for another cause: the bill of lading was retained by DBI pending Ambiente’s full
payment of the shipment. Ambiente and ASTI then entered into an Indemnity Agreement,
wherein the former asked the latter to release the shipment even without the surrender of the
bill of lading. The execution of this Agreement, and the undisputed fact that the shipment was
released to Ambiente pursuant to it, to our mind, operates as a receipt in substantial
compliance with the last paragraph of Article 353 of the Code of Commerce.

Articles 1733, 1734, and 1735 of the

Civil Code are not applicable.

 
DBI, however, challenges the Agreement, arguing that the carrier released the goods
pursuant to it, notwithstanding the carrier’s knowledge that the bill of lading should first be
surrendered. As such, DBI claims that ASTI and ACCLI are liable for damages because they
failed to exercise extraordi-

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65  Id., at p. 522.

 
 
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nary diligence in the vigilance over the goods pursuant to Articles 1733, 1734, and 1735 of
the Civil Code.66
DBI is mistaken.
 
Articles 1733, 1734, and 1735 of the Civil Code are not applicable in this case. The
Articles state:
Article  1733.  Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in vigilance over the goods is further expressed in
Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the
safety of the passengers is further set forth in Articles 1755 and 1756.
Article  1734.  Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Article  1735.  In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in Article 1733.

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66  Opposition to Motion to Dismiss, Records, pp. 31-32.

 
 
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Articles 1733, 1734, and 1735 speak of the common carrier’s responsibility over the goods.
They refer to the general liability of common carriers in case
of  loss,  destruction  or  deterioration  of goods and the presumption of negligence against
them. This responsibility or duty of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation,
until the same are delivered, actually or constructively, by the carrier to the consignee, or to
the person who has a right to receive them.67  It is, in fact, undisputed that the goods were
timely delivered to the proper consignee or to the one who was authorized to receive them.
DBI’s only cause of action against ASTI and ACCLI is the release of the goods to Ambiente
without the surrender of the bill of lading, purportedly in violation of the terms of the bill of
lading. We have already found that Bill of Lading No. AC/MLLA601317 does not contain such
express prohibition. Without any prohibition, therefore, the carrier had no obligation to
withhold release of the goods. Articles 1733, 1734, and 1735 do not give ASTI any such
obligation.
The applicable provision instead is Article 353 of the Code of Commerce, which we have
previously discussed. To reiterate, the Article allows the release of the goods to the consignee
even without his surrender of the original bill of lading. In such case, the duty of the carrier to
exercise extraordinary diligence is not violated. Nothing, therefore, prevented the consignee
and the carrier to enter into an indemnity agreement of the same nature as the one they
entered here. No law or public policy is contravened upon its execution.

Article 1503 of the Civil Code

does not apply to contracts
for carriage of goods.

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67  Civil Code, Art. 1736.

 
 
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In its petition, DBI continues to assert the wrong application of Article 353 of the Code of
Commerce to its Amended Complaint. It alleges that the third paragraph of Article 1503 of the
Civil Code is the applicable provision because: (a) Article 1503 is a special provision that deals
particularly with the situation of the seller retaining the bill of lading; and (b) Article 1503 is a
law which is later in point of time to Article 353 of the Code of Commerce.68 DBI posits that
being a special provision, Article 1503 of the Civil Code should prevail over Article 353 of the
Code of Commerce, a general provision that makes no reference to the seller retaining the bill
of lading.69
DBI’s assertion is untenable. Article 1503 is an exception to the general presumption
provided in the first paragraph of Article 1523, which reads:
 
Article  1523.  Where, in pursuance of a contract of sale, the seller is authorized or
required to send the goods to the buyer, delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose of transmission to the buyer is deemed
to be a delivery of the goods to the buyer, except in the cases provided for in
Articles 1503, first, second and third paragraphs, or unless a contrary intent
appears.
Unless otherwise authorized by the buyer, the seller must make such contract with the
carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods
and the other circumstances of the case. If the seller omit so to do, and the goods are lost or
damaged in the course of transit, the buyer may decline to treat the delivery to the carrier as a
delivery to himself, or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the buyer under
circumstances in which the seller knows or ought to know that it is usual to insure,

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68  Rollo, pp. 17-18.

69  Id., at p. 17.
  
 
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the seller must give such notice to the buyer as may enable him to insure them during
their transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk
during such transit. (Emphasis supplied)
 
Article 1503, on the other hand, provides:
 
Article  1503.  When there is a contract of sale of specific goods, the seller
may, by the terms of the contract, reserve the right of possession or ownership in the
goods until certain conditions have been fulfilled. The right of possession or ownership
may be thus reserved notwithstanding the delivery of the goods to the buyer or to a
carrier or other bailee for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are deliverable to the
seller or his agent, or to the order of the seller or of his agent, the seller thereby reserves
the ownership in the goods. But, if except for the form of the bill of lading, the ownership
would have passed to the buyer on shipment of the goods, the seller’s property in the
goods shall be deemed to be only for the purpose of securing performance by the buyer of
his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are deliverable
to order of the buyer or of his agent, but possession of the bill of lading is
retained by the seller or his agent, the seller thereby reserves a right to the
possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and transmits the bill of
exchange and bill of lading together to the buyer to secure acceptance or payment of the
bill of exchange, the buyer is bound to return the bill of lading if he does not honor the
bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right
thereby. If, however, the bill of lading provides that the goods are deliverable to the
buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the
consignee named therein, one who
 
 
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purchases in good faith, for value, the bill of lading, or goods from the buyer will
obtain the ownership in the goods, although the bill of exchange has not been honored,
provided that such purchaser has received delivery of the bill of lading indorsed by the
consignee named therein, or of the goods, without notice of the facts making the transfer
wrongful. (Emphasis supplied)
 
Articles 1523 and 1503, therefore, refer to a contract of sale between a seller and a buyer.
In particular, they refer to who between the seller and the buyer has the right of possession or
ownership over the goods subject of the sale. Articles 1523 and 1503 do not apply to a contract
of carriage between the shipper and the common carrier. The third paragraph of Article 1503,
upon which DBI relies, does not oblige the common carrier to withhold delivery of the goods in
the event that the bill of lading is retained by the seller. Rather, it only gives the seller a
better right to the possession of the goods as against the mere inchoate right of the buyer.
Thus, Articles 1523 and 1503 find no application here. The case before us does not involve an
action where the seller asserts ownership over the goods as against the buyer. Instead, we are
confronted with a complaint for sum of money and damages filed by the seller against the
buyer and the common carrier due to the non-payment of the goods by the buyer, and the
release of the goods by the carrier despite non-surrender of the bill of lading. A contract of sale
is separate and distinct from a contract of carriage. They involve different parties, different
rights, different obligations and liabilities. Thus, we quote with approval the ruling of the CA,
to wit:
 
On the third assigned error, [w]e rule for the defendants-appellants [ASTI and
ACCLI].  They are correct in arguing that the nature of their obligation with
plaintiff [DBI] is separate and distinct from the transaction of the latter with
defendant Ambiente. As carrier of the goods transported by plaintiff, its
obligation is simply to ensure that such
 
 
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goods are delivered on time and in good condition. In the case [Macam v. Court
of Appeals], the Supreme Court emphasized that “the extraordinary responsibility of the
common carriers lasts until actual or constructive delivery of the cargoes to the consignee
or to the person who has the right to receive them.” x x x
It is therefore clear that the moment the carrier has delivered the subject
goods, its responsibility ceases to exist and it is thereby freed from all the
liabilities arising from the transaction. Any question regarding the payment of
the buyer to the seller is no longer the concern of the carrier. This easily debunks
plaintiff’s theory of joint liability.70 x x x (Emphasis supplied; citations omitted)
 
The contract between DBI and ASTI is a contract of carriage of goods; hence, ASTI’s
liability should be pursuant to that contract and the law on transportation of goods. Not being
a party to the contract of sale between DBI and Ambiente, ASTI cannot be held liable for the
payment of the value of the goods sold. In this regard, we cite Loadstar Shipping Company,
Incorporated v. Malayan Insurance Company, Incorporated,71 thus:

Malayan opposed the petitioners’ invocation of the Philex-PASAR purchase

agreement, stating that the contract involved in this case is a contract of affreightment
between the petitioners and PASAR, not the agreement between Philex and PASAR,
which was a contract for the sale of copper concentrates.
On this score, the Court agrees with Malayan that contrary to the trial court’s
disquisition, the petitioners cannot validly invoke the penalty clause under the Philex-
PASAR purchase agreement, where penalties are to be imposed by the buyer PASAR
against the seller Philex if some elements exceeding the agreed limitations

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 70  CA Decision, Rollo, pp. 39-40.
71  G.R. No. 185565, November 26, 2014, 742 SCRA 627.

 
 
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are found on the copper concentrates upon delivery. The petitioners are not privy
to the contract of sale of the copper concentrates. The contract between
PASAR and the petitioners is a contract of carriage of goods and not a contract
of sale. Therefore, the petitioners and PASAR are bound by the laws on
transportation of goods and their contract of affreightment. Since the Contract of
Affreightment between the petitioners and PASAR is silent as regards the computation
of damages, whereas the bill of lading presented before the trial court is undecipherable,
the New Civil Code and the Code of Commerce shall govern the contract between the
parties.72 (Emphasis supplied; citations omitted)
 
In view of the foregoing, we hold that under Bill of Lading No. AC/MLLA601317 and the
pertinent law and jurisprudence, ASTI and ACCLI are not liable to DBI. We sustain the
finding of the CA that only Ambiente, as the buyer of the goods, has the obligation to pay for
the value of the shipment. However, in view of our ruling in  Nacar v. Gallery Frames,73  we
modify the legal rate of interest imposed by the CA. Instead of 12%  per annum  from the
finality of this judgment until its full satisfaction, the rate of interest shall only be 6%  per
annum.
WHEREFORE, the petition is DENIED  for lack of merit. The August 16, 2007 Decision
and the September 2, 2008 Resolution of the Court of Appeals in C.A.-G.R. CV No. 79790 are
hereby AFFIRMED with the MODIFICATION that from the finality of this decision until its
full satisfaction, the applicable rate of interest shall be 6% per annum.
SO ORDERED.

Velasco, Jr. (Chairperson), Peralta, Perez and Reyes, JJ., concur.

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72  Id., at p. 637.
73  G.R. No. 189871, August 13, 2013, 703 SCRA 439.

 
 
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Petition denied, judgment and resolution affirmed with modification.

Notes.—In maritime transportation, a bill of lading is issued by a common carrier as a

contract, receipt and symbol of the goods covered by it. (Eastern Shipping Lines, Inc. vs.
BPI/MS Insurance Corp., 745 SCRA 98 [2015])
 The bills of lading represent the formal expression of the parties’ rights, duties and
obligations. (Id.)
 
 
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